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CANADA THE OUTLIER

Canada is the only G7 country on the US Trade Representative’s intellectual property watch list, which this country has graced since 1985 in company with countries like Russia, China and India.

Canada’s sullied reputation arises largely because Canada is the sole developed nation that requires applicants to demonstrate the “utility” of an invention at the time of application. To be sure, Canada’s Patent Act mandates that an invention must be “useful” to be patentable. Usefulness is not defined in the legislation, but throughout the twentieth century courts consistently ruled that an invention only needed to have a ‘scintilla of utility’ to be patentable.

All this changed in 2002 in the seminal decision of Apotex Inc. v. Wellcome Foundation. Historically, utility had been examined by the Patent Office as of the date the patent was challenged. But in Wellcome, the SCC held that patent applicants must either demonstrate or “soundly predict” the utility of an invention as of the filing date. This effectively required applicants to evidence utility in the patent application, even though this disclosure requirement is not found in the Patent Act.

Consequently, courts have been assessing utility against the “promise of the patent,” a subjective construct that the courts determine by reading the patent as a whole, as opposed to just the patent claims. The upshot is that determining the promise has become a very contentious and unpredictable issue in Canadian patent litigation and a fruitful ground for attacking pharmaceutical patents in particular.

In following Wellcome, Canadian courts have gone so far as to strike patents on the basis that utility has not been shown in the patent application even though the drugs have in fact proved useful by the time the courts dealt with the issue. Generic drug companies, of course, have benefitted from this jurisprudence because it allows them to launch generic versions of a drug in Canada well before a patent would otherwise have expired.

Indeed, Canadian courts have decided that a host of blockbuster drugs are not “useful” under Canadian patent law. Apart from Strattera and Zyprexa, the list includes Mevacor, a cholesterol lowering agent; Nexium, an acid reflux medication; Evista, used to treat and prevent osteoporosis; Altace, prescribed for high blood pressure; and Xalatan, to ameliorate high eye pressure. Eli Lilly says that decisions of this kind have cost it $1 billion in sales and deprived the country of 280 jobs.

To some extent, it appears that Canadian courts have taken notice of the criticisms. In particular, the Federal Court of Appeal recently softened or corrected earlier decisions by attempting to clarify the utility requirement in cases such as Sanofi-Aventis v. Apotex Inc., which involved Plavix, an anti-clotting medication; and Apotex Inc. v. Pfizer Canada Inc., in which the court upheld the validity of the patent for the anti-inflammatory drug Celebrex.

Legislative change is also in the air. In December 2014, more than 14 years after Canada undertook adherence to the Patent Law Treaty adopted in Geneva in June 2000 by 36 countries, including the US and the European Union, amendments to the Patent Act and the Patent Rules fulfilling these undertakings received Royal Assent. Unfortunately, the changes required to actually harmonize Canada’s intellectual property laws with international obligations and treaties will not occur until at least late 2016, according to the Canadian Intellectual Property Office.

The international treaty seeks to simplify and harmonize administrative practices among national IP offices with respect to the patent application process. The domestic amendments relate to filing formalities, additions and incorporations by reference, notification of unpaid fees, the reinstatement process, restoration requirements, intervening rights, and transfers. At press time, the date for coming into force of these amendments had not been established.

The Comprehensive Economic and Trade Agreement between Canada and the EU, on which agreement in principle was announced in 2014, will also improve Canadian protection of pharmaceutical innovators’ patents — but not narrow the gap entirely.

The three key areas in which Canadian protections lag behind those of the UK (as well as the US and other developed nations) are patent term restoration, which extends the life of patents to account for mandatory regulatory delays; data exclusivity, which limits the period during which generics may use innovator data for drug approval applications; and rights of appeal, which Canada’s Patented Medicines (Notice of Compliance) Regulations, used to resolve issues between innovators and generics, grants only to generics.

Currently, the US and EU offer up to five years of patent restoration, while Canada offers none: CETA envisions Canadian protections to a maximum of two years. Innovators will also get a right of appeal when a court invalidates their patents. Otherwise, data protection does not appear to have been addressed in CETA, meaning that the gap between Canada, at up to 8.5 years, and the EU, which offers 10 years plus one year for new indications, will likely remain. (The US offers five years plus one year for regulatory delays plus three years for new indications for pharmaceuticals and 12 years for biologics.)